You don’t need to be an accounting major to understand how businesses work but you do need to understand how businesses tell their story. That story lives inside a document that most students flip past with dread: the financial statements.
For many finance or economics students, numbers in annual reports can feel intimidating after all it’s pages of dense tables, unfamiliar terms, and ratios that look like another language. But learning to read them isn’t about becoming an accountant. It’s about learning to see what those numbers mean.
Because if you can read a company’s financial statements, you can understand its health, its risks, and its potential which are three things that every future analyst, investor, or finance professional must be able to interpret confidently.
Why Financial Statements Matter for Everyone in Finance
Finance and accounting are cousins - they’re distinct, but closely related. You don’t have to prepare statements, but you should be able to decode them. They’re the universal language that investors, lenders, and executives use to make decisions.
Being able to read a company report means you can:
Spot trends before the market reacts
Ask smarter questions in interviews and internships
Understand valuation models with confidence
Translate financial data into business insight
When you can connect a profit and loss statement to the story of a company’s growth, that’s when you stop memorising theory and start thinking like a professional.
Where to Start: The Three Core Financial Statements
Every company’s annual report contains three main statements that fit together like a puzzle:
Profit and Loss Statement (P&L) — shows the company’s performance over a period.
Revenue
Expenses
Profit (or loss)
Think of it as the movie of what happened during the year.
Balance Sheet — a snapshot of what the company owns and owes at a point in time.
Assets (cash, inventory, property)
Liabilities (debts, accounts payable)
Equity (the shareholders’ stake)
This is the photo — the still image of the company’s financial position.
Cash Flow Statement — tracks how money actually moved in and out.
Operating activities
Investing activities
Financing activities
The cash flow is what keeps the business alive. A company can report profit yet still run out of cash — this is where you’d see why.
Once you can mentally link these three, the fog lifts. They tell one cohesive story: how well a business is generating profit, using its assets, and managing its cash.
Breaking Down the Fear Factor
The first time you open a 100-page annual report from an ASX-listed company, it can feel overwhelming. But most of that content is context such as notes, policies, auditor statements, director comments.
Here’s a secret: you don’t need to read it all at once. Start with the sections that build your understanding gradually.
Read the CEO and Chair’s report first.
It provides a human summary — what went well, what didn’t, and where the business is heading. This gives context for the numbers that follow.Skim the financial highlights.
Most annual reports now open with a one-page summary of key results: revenue growth, NPAT, dividends, EPS. Get familiar with the language.Find the three core statements.
Usually titled “Statement of Financial Performance”, “Statement of Financial Position”, and “Statement of Cash Flows”. These are your anchor points.Compare year-on-year changes.
Numbers mean little in isolation. Look at how each figure has moved from the previous year — that’s where the story lives.
You’ll soon start noticing patterns such as rising debt, declining margins, cash flow swings which reveal the real state of the business beneath the press release gloss.
How Non-Accounting Majors Can Practise
You don’t need expensive software or an internship to get started. Choose one or two ASX-listed companies you know - maybe a brand you shop with or a bank you use. Download their annual reports (they’re free, usually under the “Investor Relations” tab) and start exploring.
Open the PDF and ask yourself:
Is revenue growing faster than costs?
Are assets being funded more by debt or equity?
Does cash flow match the reported profit?
Are there major shifts in expenses or liabilities?
You’re not trying to audit the accounts, you’re trying to understand what story the numbers are telling.
To make it practical, create a small table summarising three years of key figures — revenue, net profit, total assets, total liabilities, and operating cash flow. Once you see the trends side by side, insight emerges quickly.
Common Pitfalls (and How to Avoid Them)
Focusing only on profit.
Profit is important, but cash flow is what sustains a business. Many companies report profit while quietly bleeding cash. Always check both.Ignoring the notes section.
The notes explain accounting choices that can dramatically affect how results look. For example, changes in depreciation methods or asset revaluation policies. You don’t need to read all 80 pages, just skim for changes or large one-off adjustments.Taking ratios at face value.
Ratios are useful, but only if you know the story behind them. A low debt-to-equity ratio might look safe or it might mean the company isn’t investing enough in growth. Context is everything.
Linking It Back to Real-World Finance Roles
If you plan to work in investment banking, financial analysis, superannuation, or corporate strategy, you’ll use financial statements daily. But even in product, marketing, or risk roles, financial fluency builds credibility.
Imagine being in a meeting where revenue and margin are discussed, the ability to interpret those terms in context instantly sets you apart. You don’t need to be the accountant in the room; you just need to understand the language they speak.
This skill also builds confidence in interviews. When asked about a company you admire, referencing a real insight from its annual report shows initiative. For example:
“I noticed that XYZ Ltd grew revenue 12 per cent last year, but operating cash flow only rose 2 per cent — I’d love to understand how they’re managing working capital.”
That’s a question that sounds like someone ready for an analyst role.
Developing an Intuitive Feel for Numbers
With practice, you’ll start recognising what “healthy” looks like. Steady profit growth, manageable debt, positive cash flow, and consistent dividends are usually good signs. But anomalies — sudden spikes or dips invite curiosity.
The goal isn’t to memorise formulas; it’s to develop financial intuition. Over time, you’ll be able to glance at a report and sense whether something feels off or promising.
This intuition is what turns finance students into analysts - the ability to look beyond numbers and read behaviour, performance, and opportunity.
Bringing It All Together
Understanding financial statements isn’t about ticking a technical box. It’s about learning to see what others miss which is the real story behind the spreadsheets.
As a finance student, you already have the foundation: critical thinking, an interest in markets, and an analytical mind. Add a basic command of financial statements, and you’ve built a language that connects every part of the business world from banking to fintech, ESG to corporate strategy.
Start small. Pick a company, read its latest report, and jot down what you notice. You’ll be surprised how quickly your confidence grows and how naturally conversations about profit, assets, and equity start to make sense.
Because at its core, understanding company reports isn’t about accounting, it’s about curiosity. And that’s something every future finance professional should cultivate.